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Stocks end lower as Nasdaq flops

U.S. stocks, dragged down by weak manufacturing data from China and mixed signals from the Federal Reserve on interest rates, were lower in afternoon trading as the final week of the first-quarter kicked off.

Stocks end lower as Nasdaq flops

There won't be any big earnings news this week, but we've got more than a dozen IPOs on the way, including the maker of Candy Crush. And, Herbalife is taking directors from Carl Icahn's camp as it prepares to fend off activist investor Bill Ackman.
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Traders work on the floor of the New York Stock Exchange on March 21.(Photo: Richard Drew, AP)

The Dow Jones industrial average, which had been up as much as 0.5%, lost ground and ended down 0.2%, to 16,276.69. The Standard & Poor's 500 index lost 0.5%, to 1,857.44. The Nasdaq composite ended down more, off 1.2% to 4,226.39 as money flowed away from hot sectors such as biotech.

"As the first quarter meanders to a close, there is a lack of direction in global financial markets," says David Kelly, chief global strategist at JPMorgan Funds. "For now, investors seem suspended in an uneasy equilibrium, placing their hopes in easy money and improvement in developed economies, while still fearing geopolitical shocks and imbalances in Asian economies."

Wall Street, of course, is trying to divine the next major directional move in the stock market amid signs of an improving U.S. economy that is being somewhat offset by fears that the Federal Reserve could start to increase short-term interest rates earlier than expected next year.

Last week, new Fed chair Janet Yellen said the nation's central bank could start hiking short-term rates six months after the Fed ends its bond-buying program. If true, that would mean rate hikes could come as early as April, rather than late-2015 as Wall Street had been expecting.

Investors are also dealing with continued geopolitical risks centered on the Ukraine crisis and a continued slowdown in Chinese manufacturing.

China's manufacturing weakened according to the preliminary version of HSBC's purchasing managers' index , which dropped to 48.1 in March from February's 48.5. Readings below 50 on the 100-point scale indicate a contraction in activity. Factory output shrank at the fastest clip in 18 months.

But the survey had a bright spot that for investors may have outweighed the signs of weakness in China's domestic economy. It showed that new orders from overseas export customers rose, spelling a recovery in overseas demand.